Abuse Of Professional Undertaking: City Lawyers Nick Ndeda, Harit Sheth And Conrad Maloba On The Spot

Multiple court rulings have questioned the conduct of lawyers over abuse of ‘professional undertaking’ cash received from clients and instead of spending on intended purposes, it is either diverted in what judges have cited as being tantamount to outright fraud.

In what paints a new trend by legal practitioners of using unorthodox means to fleece money from their clients, in the last few months, at least three law firms have now been indicted over the alleged professional misconduct.

An advocate’s undertaking, according to the Law Society of Kenya (LSK) Code of Conduct and Ethics for lawyers, is a personal promise as well as a professional and legal obligation. It is based on the concept of the legal profession as an honourable profession and the expectation that an honourable person will keep (honour) his/her word.

Section 14 of the Advocates (Professional Conduct) Regulations categorically states that an advocate shall not give any undertaking to another advocate or any other person knowing that he or she has no authority or means of satisfying the undertaking; and knowingly breach the terms of an undertaking.

In a ruling delivered in February, Milimani High Court Judge Justice Janet Nzilani Mulwa ordered Nairobi based lawyer Conrad Anagwe Maloba of Conrad Maloba & Associates to refund Sh20 million plus interest on account of professional undertaking.

“The Respondent (Conrad Maloba) shall within 30 days from the date of this judgment honour the professional undertaking dated June 15, 2021 by refunding to the applicants the sum of Sh20,000,000 together with interest at court rates from the date of filing the Summons. The Applicants shall have costs of the application.” Justice Mulwa ruled.

Evidence tabled in court showed that in a joint venture agreement (JVA) on June 18, 2021, Ugbad Consult Limited, entered into an agreement with Maloba’s client, Christine Imbosa Mbogua, for construction of a residential building of about 20 floors.

It was agreed that once the project was completed, the proprietor (Ms Mbogua) would be allocated 30 percent of residential units while the developer (Ugbad Consultants) would have been allocated 70 percent of the units.

The parties further agreed that upon execution, the developer would pay the proprietor Sh20 million to forfeit two three bedroom residential units in the project.

This amount was considered as the off-plan value of the two units. Further, the parties agreed that upon execution, the developer and their lawyers would incorporate a Special Purpose Vehicle (SPV) to be known as Sakina Real Estate Limited for purposes of development of the project.

In order to facilitate the release of the Sh20 million, to the proprietor, Maloba issued a professional undertaking on June 15, 2021 to the developer’s advocates, promising to refund the money in the event of termination of the agreement, within seven days of the termination.

The money was deposited to the lawyer’s bank account the following day.

The contract was, however, terminated over alleged suspicious circumstances surrounding the proprietor’s ownership of the land, where the property was to be developed.

The developer said it discovered after conducting due diligence that the title deed to the property was under investigation by the Directorate of Criminal Investigation as third parties claimed ownership to the land.

Maloba on his part said he could not honour the undertaking because the agreement was terminated improperly and prematurely. He argues that termination was not done in accordance with a clause in the agreement, which required the developer to give the proprietor 30-days’ notice.

Further, Maloba claimed that the developer’s lawyers failed to incorporate the SPV as agreed despite the fact that he performed his contractual obligations. He added that the property was vacant, but the vacancy would only be granted upon incorporation of the SPV.

The judge rejected the argument saying the lawyer was under an obligation to honour the professional undertaking as promised. “He cannot evade fulfilling the same by citing conditions that were not part of the Undertaking,” the judge said.

In a similar ruling, city based lawyer Harit Sheth of Harit Seth Advocates was ordered to pay back Sh38.7million on account of professional undertaking.

The law firm made the undertaking as Jambo Biscuits Limited transferred its business to Jambo Africa Limited (Mauritius), in an agreement executed on June 24, 2016.

Court documents show that the law firm issued a professional undertaking as representatives of Britannia, the maker of Jambo biscuits, to pay the money in case a suit that was pending in court was dismissed.

The funds in an escrow fund account held jointly by the advocates representing the companies, was to cater for any contingent claims and liabilities of Jambo.

The Undertaking also provided that in the event Britannia’s suit was dismissed or judgment of the court in Britannia’s favour was reversed on appeal, then the advocates would stand automatically discharged from the undertaking

In a ruling delivered in December 2021, the court ordered that the funds be released to Jambo, but that the purchasers were dissatisfied with the decision. They lodged an appeal at the appellate court and sought orders of stay of the decision.

The law firm defended itself saying they do not have access to the said funds and should wait for the outcome of the appeal.

The advocates contend that the undertaking is not enforceable as they have not received the escrow funds from the escrow account.

“I allow the plaintiff/applicant’s originating summons dated June 1, 2022 and order that the 2nd Respondent (Harit Sheth) shall honour the terms of the professional undertaking dated September 9, 2016 by paying the Plaintiff (Britannia Sacco) the sum of Sh38,737,349.46 within 30 days of the date of service of this court’s ruling and order. Lawyer Sheth will shoulder the costs of the application.” A Nairobi High Court ruling delivered by Justice David Majanja reads in part.

Further, the judge observed that the firm of Harit Seth Advocates “cannot argue that they have not received the funds in escrow when in fact the escrow account is under their control as lawyers of Jambo on whose behalf they gave an Undertaking.”

Similarly, flamboyant city lawyer Nick Ndeda of Nick Ndeda Advocates & Associates was ordered to pay back more than Sh4 million obtained from Kencom Sacco Society Limited, arising from a professional undertaking but later diverted for other use.

High Court Judge Lady Justice Asenath Ongeri directed the lawyer in a judgement dated August 18, 2023 to refund the money to Kencom Sacco Society Ltd, which was meant for the processing of a loan.

Lawyer Moses Sande Makhandia informed the court that Sacco was to obtain a loan from Ndeda’s client Infracapital Investment Group Limited, a company incorporated in the United Kingdom.

Left to right: Harit Sheth, Nick Ndeda and Conrad Anangwe Maloba.

The letter of offer stated that the money was required as part of due diligence and the money was paid by the Sacco’s lawyers on March 8, 2017 and acknowledged.

The court heard that on March 28, 2017, the Sacco received a letter from Ndeda acknowledging receipt of the amount and also indicated that there was a deficit of Sh88,238.

The parties later fell out and Ndeda was instructed to refund the money as the Sacco did not wish to proceed with the transaction because of the delay on the lawyer’s part and his lack of communication.

The court heard that the undertaking was clear, unequivocal and enforceable and in spite of the various requests to the lawyer for the payment, he was silent and unwilling to observe it.

“I find that the terms for the release of the funds to the defendant were clear and as a professional the defendant was required to observe the terms of his professional undertaking.

“Any money or documents given and received on the strength of a professional undertaking cannot be utilised for any other purpose other than what they are intended for. It is outside the mandate of an advocate to purport to use or convert an undertaking for an event other than what it was intended for and agreed between the parties. To allow advocates to retain client funds for no reason at all would be a travesty of justice and an abuse of the fiduciary trust. By extension, it would amount to conversion and criminal activity.” Justice Ongeri observed.

Consequently, the judge ruled in favour of the applicant against the respondent in the sum of USD 35,000 or its equivalent in Kenya shillings together with costs and interest from the date of filing suit.